My dear Prime Minister,
EMPIRE MARKFTING BOARD
The first piece of news to chronicle under this head is the final decision taken today in regard to Geophysical Prospecting. The Sub-Committee of the Committee of Civil Research had recommended the complete trial of geophysical methods in Australia on a 50-50 basis between the Commonwealth Government and the Empire Marketing Board and has assessed the cost at 27,000 spread over two years.
Negotiations with Broughton Edge , the geophysicist recommended by the Sub-Committee, showed that a slight increase in that sum would be required. Today the Empire Marketing Board agreed to participate and authorized expenditure not to exceed 10,000 in the first year and 6,000 in the second, as the Board's share of the costs.
This should prove more than adequate and I am glad that a subject which has taken up a lot of time and energy has at last reached what I hope will be a satisfactory solution. The minimum result for Australia will be her possession of a trained team of highly qualified geophysical surveyors. It may, however, happen that valuable discoveries may result during the trials. In order to emphasize the Imperial character of the proposal, I today stated that if any interested Government, such as Canada or South Africa, desired to study the methods, there would be no objection to the sending of a qualified worker to Australia to participate in the work once it had been properly established. I indicated the second year as the earliest period. I hope you will, if necessary, support my attitude on this point.
Another small decision of considerable interest to Australia was one which I brought up concerning Viticultural research. It was decided to arrange for a survey of all the available knowledge on (a) the production of better vines (b) the improvements in the technology of wine making. This is to be done during the next three months and is intended to form a basis from which decisions can be reached on larger scale research on this subject. The improvement of Australian vintages and wines is a subject which is worth a good deal of work.
Julius  is very glad that this move is being made.
MR. AMERY'S  DEPARTURE
On Friday I went to Waterloo to say goodbye to Amery and his party. There was quite a crowd-Lord Mayor, Ministers, etc. Amery took me into his saloon and, after throwing some unnecessary bouquets, asked me to be careful not to cause any jealousy among my colleagues on the Empire Marketing Board.
I naturally asked if he had any grounds for such a suggestion. He said only his instinctive fear of Canadian susceptibilities.
Naturally I promised to be careful as indeed I have always been, but I told Amery that if Canada hung back that was no reason for Australia to do so.
Rather curiously Bell , after reading the Empire Marketing Board's Report, suggested that I should 'barrack' for South Africa and Canada occasionally.
Actually the position of course is this. Australia is keen and willing to cooperate and to do team work on any Imperial problem.
The other Dominions are less interested and inevitably the willing partner comes more to the centre of things.
I really think the Empire Marketing Board's work is going well and I hope that impression may be held in Australia. You are the Board's spiritual Godfather as a consequence of the Imperial Conference of 1923 and I do not forget that the success of the Board should have an indirect effect upon the situation in Australia.
I have already told you that Julius and I are collaborating very heartily indeed. I have formed a high opinion of his judgment and his zeal is undoubted. His presence has, however, resulted in great inroads on my time and, as a result, July has been a month of extremely intense work. In fact every night I have been working until late.
Julius appears likely to have a success with his 'tote'.  He leaves for a six weeks' motor tour early next week. I shall pick him up for a day at the Aberystwyth and the Aberdeen Research Stations.
IMPERIAL ECONOMIC COMMITTEE
The Fish Report will be signed on Friday and will constitute I believe a really valuable piece of work. It is naturally not much concerned with Australia but the main lines of argument and recommendations should prove valuable to the Development and Migration Commission in tackling Australian fishery problems.
Last Thursday Mr. Baldwin  made a very important speech on the state of Agriculture at Louth in Lincolnshire. I am enclosing the 'Times' report of this speech which is practically verbatim. The National Farmers' Union are engaging in a fierce attack on the Government as a result of this speech but I do not think they are doing themselves very much good, because their statements are far too extreme. It may interest you just to glance at a cutting from the 'Manchester Guardian' giving the gist of the National Farmers' Union's attitude. 
Hilton Young  has written to me asking whether I will cast my memorandum on 'Agriculture and the Empire' into three articles for the Financial News. I have not yet decided what action to take in this matter.
I enclose a decidedly interesting article from the 'Times Trade Supplement' entitled 'Safeguarding and Protection' by J. S. Hecht, which I think is worth while your reading. 
The Advertising Exhibition is supposed to have been a great success. I only had time to spend half an hour there. I am, however, enclosing a 'Times' report of speeches made at the Advertising Convention which was held simultaneously and would in particular draw your attention to the speech made by Thomas.  According to the 'Times' report, he stated that whatever were the changes, the work of the Empire Marketing Board would go on. I understand from those who were present that he was even more emphatic and without equivocation pledged any Labour Government to maintain the Empire Marketing Board. I shall try to obtain a verbatim account of his speech if one was taken.
HOUSE OF COMMONS
On Monday last a most interesting debate occurred on the Board of Trade vote. Cunliffe-Lister  at last acknowledged that the trade position is unsatisfactory and gave official figures which amply confirmed the views expressed by you at the Imperial Conference. I want particularly to draw your attention to the suggestion made by A. V. Alexander.  He was one of the delegates to Australia, Parliamentary Secretary to the Board of Trade in the Labour Government, and is pretty sure of Cabinet rank in any future Labour Government. His veiled reference to Mr.
Pratten  is also worth noting.
I am enclosing the Hansard with marks against the portions of the debate worthy of your attention. I think you will care to read the whole of Tom Johnston's  speech.
With regard to Alexander's suggestion, I will write more fully later.
THE AUSTRALIAN TARIFF
I have received from the Empire Marketing Board a copy of a letter sent by a large Leicester Hosiery Manufacturer to Sir Philip Cunliffe-Lister, on the subject of the Australian Tariff on hosiery. It is an interesting example of the irritation which very extreme tariffs in the Dominions cause in the minds of British manufacturers. I am enclosing herewith copy of the letter referred to.
I know the Empire Marketing Board were able to reply by sending a memorandum which I prepared on the 'British Hosiery Trade and the Australian Market' to show that, in spite of the tariff changes, Australia is probably still the largest market in the world for British knitted goods, although, the final figures for 1926 not being available, it is impossible completely to prove the point.
AUSTRALIAN WINE TRADE
T. C. Angove, a large wine maker in South Australia, has been over here for some time studying the market. He has arrived at certain conclusions which are worth your notice. I do not suggest that they are necessarily right but Angove has gone to a lot of trouble and I feel pretty sure he gives them to me honestly, although he is a little of a pessimist. He thinks that foreign wine makers by exporting 2 parts of N.E.25 wine (duty 3/- per gallon) and 1 part of N.E.40 (duty 8/- per gallon), blending in London can achieve the following prices in comparison to Australian, based upon an Australian price of 3/3d per gallon f.o.b. Australian port, less wood and less bounty:
Angove's estimate of wine prices duty paid London
strength per gal.
Australian 34 9/1d.
2 parts N.E.25) 30 8/6d.
1 " N.E.40) Tarragona blended as above 30 8/1d.
*British made excise paid 30 5/-
*The British excise is only 1/- per gallon.
If these figures are approximately correct, it remains to be seen what sort of quality the foreign blended wines will produce. The British wine is distinctly bad and Angove himself declares the Australian wine to be much superior to any of the above blends.
The new preferences have driven the foreign makers to try this blending. I feel that the lesson from these figures is that Australia must not be too anxious for the highest possible price but must build up a strong trade position based on quality and regular supplies.
Yours sincerely, F. L. MCDOUGALL